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Title: Empirical essays on trade-based market abusive behaviour
Author: Machain, Luciano
ISNI:       0000 0004 7425 2470
Awarding Body: University of Reading
Current Institution: University of Reading
Date of Award: 2014
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In this thesis, I present three empirical essays describing trading situations in which the presence of speculative behaviour to intentionally move prices is a plausible explanation. In the first essay, I investigate whether the trading on the sovereign credit default swaps market influences the behaviour of the sovereign bond market in four European countries: Portugal, Greece, Spain and Germany. My findings provide empirical evidence suggesting that information flows from the sovereign CDS market to the sovereign bond market in countries with a deterioration on the credit condition. I find evidence that the daily CDS trading activity plays a crucial role on the price discovery process. The next two essays are related and I investigate the use of limit order cancellations on the London Stock Exchange’s main electronic market. I document that around 95% of the limit orders are cancelled in less than one hour. I first look at the intensity of limit order cancellations and the effects on market liquidity. Among others, I find that a big proportion of limit orders are cancelled as they are approaching the top of the order book. On average, long-lived limit orders are associated with high market spreads and short-lived limit orders with low spreads. However, when long-lived limit orders are aggressively cancelled as they are approaching the top of the order book, they actually associated with low spreads, behaving like short-lived orders. In the last essay, I focus on the price impact and the informative content of limit order cancellations. I find that a temporary overreaction in quotes is observed immediately after the event of cancellation. I document that this overreaction is produced by HFTs’ activity that submit and quickly cancel limit orders. These findings suggest that HFTs’ cancellation activity is not informative but non-HRs’ limit order cancellations convey information.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available